20-11-2009 - ECommerce

Electronic Commerce (EC)
Definition
“The buying and selling of products,

exchanging of products, services and
information via computer networks,
primarily the Internet”
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 Communication perspective:
 E-Commerce is the delivery of Information, Product/Service
or Payments over telephone lines, computer networks or any
other electronic means.
 Service perspective:
 E-Commerce is a tool that addresses the desire of firms,
consumers, and management to cut service cost while
improving the quality of goods and increasing the speed of
service delivery.
 On-line perspective:
 E-Commerce provide the capability of buying and selling
products and information on the Internet and other online
services.
 Brick-and mortar market place.
 Click and mortar
 Electronic Marketplace – Market space
 Business transaction occurs across
telecommunication network where buyers,
sellers and others involved in the business
transaction – electronic commerce.

E-Commerce vs. e-Business
 Buying and selling, product and services on the

Internet
 commercialization of Internet – e-Commerce.
 Delivery of information, providing customer

service before and after sales, collaborating with
business partners and enhancing the
productivity in the organization – e-Business

 IBM defines electronic Business as “the transformation
of key business processes through the use of Internet
technologies”.
“E-business is all about time, cycle, speed, globalization,
enhanced productivity, reaching new customers, and
sharing knowledge across institutions for competitive
advantage”
Lou Gerstner
former CEO IBM

E-com activities and Components
 E-commerce is doing business electronically by;

 bringing buyers and sellers
 It integrates data, electronic communication and security
services to facilitate business applications
 communicating coordinating with suppliers, financial,
consumers, insurance agents, distributor channels and
other finding partners.
 Uses Computers and telecommunications

Business process suitability to type of commerce
 Well suited for EC:

 Sale/Purchase of books and CDs;
 On-line delivery of S/W;
 Sales/Purchase of Travel services;
 Online banking
 Online shipment tracking
 Sales/purchase of investment and insurance products

 EX: Cisco sells almost all its computer networking equipments
through its website.
 When first introduced 1998 Cisco made 72% if its sales on
the web site
 Avoided handling 500,000 calls per month, saved
$500million in that year alone.
 Currently it is 97%on net.

The Dimensions of Electronic Commerce

E-Business and the new economy
 Electronic linking of individuals and businesses has new economic

environment;
 Time and space are much less limiting factors,
 Information is more important and accessible,
 Traditional intermediaries are being replaced,
 The customers holds increasing amount of power.
 Large companies are able to conduct their business
electronically using EDI, VPN and VAN
 Companies conduct business activities on-line for 24x7
 No geographical boundary
 Ease collaboration
 In new economy processing information is more powerful and
cost-effective than moving physical products.
 More importance is for the transfer of information than the
transfer of goods.

Why Ecommerce ?
 The new economy is changing the rules of

business;
 Time is collapsing
 Distance has vanished
 Information has grater value
 Traditional intermediaries are being replaced by “
infomediaries”
 Buyers holds more power than even before.

Examples
 Travelocity. COM – replacing travel agents, and
providing online trading services
 Truckshop.com – online load, truck route, freight
matching services. Gathers information from
truckers, trucking companies, breakers, shippers,
and fright forwarders.
 Autobytel.com – free auto shopping – shoppers can
access auto specifications, vehicle reviews,
manufacturer incentives and dealer invoice price
information and also a provision to submit a
purchase request.

Benefits of E-Commerce
 To Organization
 To Customers
 To Society

To Organization
 Expand a company’s marketplace to national and international
market. With minimal capital outlay, company can quickly locate
more customers, the best suppliers.
 Enables companies to procure materials and services from other
companies, rapidly and at less cost.
 Shortens or even eliminates market distribution channels
 Decreases the cost of creating, processing, distributing, storing and
retrieving information by digitizing the process.
 Allow lower inventories
 Lowest telecommunication cost
 Helps small business to compete with large business
 Enable very specialized niche market.

To Customers
 Frequently provides less expensive products and
services.
 Gives customers more choices than they could easily
locate otherwise
 Enables customers to shop or make other transactions
24 hours a day.
 Delivers relevant and detailed information is seconds.
 Enables consumers to get customized products.
 Makes it possible for people to work and study at
home.
 Electronic communication.

To Society
 Enables individuals to work at home and
to do less traveling.
 Increase the standard of living
 Facilitates delivery of public services.

Limitations of E-Commerce
 Technical Limitations
 Non-technical Limitations

Technical Limitations
 Lack of universal acceptable standards for quality, security, and
reliability.
 Insufficient telecommunication Bandwidth.
 Still-evolving software development tools.
 Difficulties in integrating the Internet and EC software.
 Need for special web servers in addition to the network servers.

Non-Technical Limitations
 Unsolved legal issues
 Lack of national and international government regulations and
industry standards
 Customer resistance to change
 Perception that EC is expensive and unsecured.

Three pillars of Electronic Commerce
 Electronic Information
 Electronic relationship
 Electronic transactions

Frame work of E-Commerce
 Electronic Commerce Applications
 People, Public Policy, Marketing & Advertisement,

Supply Chain
 Infrastructure

A frame work for EC
 Electronic Commerce Applications:

Direct Marketing, Stocks, Jobs, Online Banking, Procurement,
Purchasing, Malls, Super Market Auctions, Travel, Online
publishing, Customer Service, Intra-business Transaction, E-
Government, E-Learning

 Peoples:  Public Policy:
 Buyers,  Taxes
 Sellers  Legal
 Intermediaries  Privacy Issues
 Services  Regulation
 IS people  Technical Standards
 Management

 Marketing & Advertising  Supply chain
 Market research  Logistic
 Promotions  Business partners
 Web content

Infrastructure
 Common Business  Managing the
Service Infrastructure: Infrastructure
 Security & smart cards Distribution
 Authentication Infrastructure:
 Electronic payment  EDI
 Directories  E-mail
 Catalogs  HTTP
 Chat Room

Infrastructure
 Multimedia content &  Network Infrastructure
Network Publishing  Telecom cable,
Infrastructure:  Internet TV
 HTML, JAVA,  Wireless Internet
WWW,VRML, XML  VAN
 WAN
 LAN
 Intranet
 Extranet
 Access cell phone

Infrastructure
 Interfacing Infrastructure:
 Database
 Logistics
 Customer
 Application

A Framework for EC

E-Business Model
 Company Business model shows the way
in which it conduct business in order to
generate revenue.

E-Business Models
1. Business to Business Commerce –B2B

2. Business to Commerce –B2C
3. Consumers to Business – C2B
4. Consumer to Consumer – C2C
5. Collaborative Commerce – c-Commerce
6. Intra-business (intra organizational) Commerce
7. Location based Commerce – L -Commerce
8. Government to Citizen – G2C
G2G, G2B (e-Governance)
9. Mobile Commerce – m-Commerce

B2B E-Commerce
 B2B applications the buyers, sellers and transactions involves
only organizations.
 Comprises the majority of EC Volume
 B2B exchanges are web sites that bring multiple buyers and
sellers together in a virtual centralized markets pace.
 Broader spectrum – distributors, sellers, customers and other
partners.

 Sell side market place: Org. attempt to sell their
products or services to others by electronically.
 Increases the EC sales
 Reduces the selling and advertising expenditures
 Increases delivery speed and reduce administrative cost
 Byers expected to come to the sellers site
 Key mechanisms are;
 Electronic catalogs that can customized for each buyer (dell.
COM)
 Forward auction. (dellauction.com)
 Ex: Cisco, IBM, Intel dell….

 Buy-side market place: companies want to buy items
places a RFQ on its site or in a bidding market place
 The sellers in this methods are manufacturer, distributors
or retailers
 Also called as reverse auction
 Reduces up to 85% of the administrative cost
 Cycle time reduces up to 50%
 Third party buy-side market place

 Group purchasing – shop2gather.com.
 Electronic exchange: e-hub, e-portal
 Uses Intranet & Extranet
 EX:
 eSTEEL (Steel and other metals)
 Houstonstreet.com ( Energy)
 Manheim online ( Auto dealers auction)

Business to Consumers
 Consumers going on-line to shop for and purchase products,
arrange financing, shipment, delivery of digital products and get
services after sales
 B2C provides high value contents to consumers for subscription.
 EX: Wall Street journal, Consumer Report, eDiets.com
 B2C & B2B - $2500bln. - $7000bln. By 2004.
 10% growth in every month.
 E-retailing, e-tailing
 Electronic Storefronts –Virtual Vine-yards
 Electronic Malls
 Online service Industries
 Auctions

E-tailing
 Direct selling to customers through electronic storefronts or
(virtual malls) malls, usually designed around the electronic
catalog format.
 Provides an interactive channel
 Offers wide verity of products and services at lower price
 Issues in e-tailing:
 Channel conflict
 Order fulfillment
 Viability of online e-tailers
 Conflict within click and mortar organization
 Lack of funding
 Incorrect revenue model.

Electronic Storefront
 Electronic business that maintain their own
Internet name and web site; may be extension of
physical stores or may be new business stated
by entrepreneurs who saw a niche on the web.
 Extension of physical store.
 Ex. – Wal-Mart, Fab-mal, B & N.
2 types
 General
 Specialized.

Service provided by store fronts;
 Travel services
 Stocks and bonds tracking
 Electronic banking (cyber banking)
 Insurance
 Job matching.
 Newsgroups

Electronic Mall
 A collection of individual shops offering many products and services under
one Internet address.
 Cybermall, e-mal.
 One-stop shopping
 Ex:
 Choice mall
 Women.com
 Network Web store
 Amazon.com
 Yahoo! Shopping
 Choicemall.COM
 Shopping2000.com
 Rocksworld.com
 Shopping.yahoo.com
 Eshop.msn.com
 Includes 1000’s of products and vendors.

Online Service Industries
 Physical product delivery – 40%
 Services can be provided online – 100%:
 Cyber banking – virtual banking, home banking and online
banking.
 International and multiple currency banking
 Electronic bill payments
 Online security trading – schwab.com – for bidding
 Online job market
 Travel
 Real estate

Auction
 Auction is a market mechanism by which sellers place
offers and buyers make sequential bids.
 Forward auctioning – a seller auctions items to many potential buyers.
 Reverse auctioning – suppliers are invited to submit a bid. E-Bay. COM
 Bartering – exchange of goods without momentary
transaction
 Barterbroker.com

C2C E-Commerce
 An individual sells product or services to
other individuals electronically.
 Classified
 Classifieds2000.com
 Personal services
 Astrology, medical advice
 Peer-to-peer (p2p) and file exchange
 Individualscan exchange on-line digital
products- music, games.

Collaborative commerce
 Communication, Information sharing, collaboration.
 Retailer-suppliers
 Vendors managed Inventory
 Product design
 Collaborative manufacturing
 Collaborative processing:
 Planning & scheduling
 Design
 New product information
 Order management
 Sourcing and procurement

E-Government
 G2G
 G2C
 G2B

M-commerce
 Mobile devices
 Remote Accessing
 L-Commerce
 Delivers information about goods and
services based on where you are located
 Uses GPS, GIS

Intra-business E-Com.
 B2E
 Business to its employees (B2E)
 E-commerce between and among units
within the business.
 E-learning.

E-business Value chain
 EC Uses many activities – manager has to

decide where and how to it in their business
 Break the business processes in to value adding
activities –to meet the org. goals and generate
profit.
 Analyze the business activities as a sequence of
activities that crate value for the firm.

 In a larger firm managers organize their
work around the activities of strategic
Business Units or Business Units
 Combination of products
 Distribution channels
 Customer care etc.

 Strategic Business Value chains:
 Michael Porter’s value chain
 A value chain is a way of organizing the activities that
each strategic business unit undertake to design,
produce, promote, market, deliver and support the
products or services it sells.
 A company’s value chain consists of all the primary and
supporting activities, called value activities, performed to
create and distribute its goods and services.

Primary activities – produce, sell, and
support its products.
Support activities – purchasing, human
resources, technology and other function
which supports primary activities.

Primary activities
Manufacture
product or Provide after sales
Design Deliver
create service service and
support
Purchase
Market
materials and
and sell
supplies Design
Identify
customers
Support activities
Finance and Human Technology
administration resources development

 Primary activities of each business unit:
 Identify customers
 New customers and new way of serving existing customers
 Design
 Research, engineering
 Purchase materials and supplies
 Procurement, vendor selection, vendor qualification, negotiating
long term supply contract, QA
 Manufacture product or create service
 Finished product, fabrication, finished product, assembling, testing

 Market and sell
 Promotion, managing salespersons, pricing, identifying
and monitoring sales and distribution channel
 Deliver
 Ship the final product, warehousing, handling
materials, fright, selecting shippers and monitoring
timeliness of delivery
 Provide after sales service and support
 Relationship with customers, repairing, fulfillment,
replacement of parts.

 Support activities:
 Finance and administration
 Paying bills, borrowing funds, reporting to govt.
regulators, and ensuring compliances with relevant laws.
 Human resource
 Recruiting, hiring, training, compensation and providing
benefits
 Technology development
 Improve the quality of product or service, and improve the
business process in every primary activities

 Most EC initiatives add value by either
reducing transaction cost, creating some
type of network effect, or combining both.

SWOT analysis; evaluating business
unit opportunities
 Identify the strengths and weaknesses.
 Review the environment in which the
business unit operates and identify the
opportunities presented by that
environment and the threats posed by the
environment.

Dell’s
StrengthsSWOT analysis
•Sell directly to Weaknesses
consumers
•No strong relationships
•Keep costs below with computer retailers
competitors costs
Opportunities Threats
•Consumer desire for •Competitors have

one-stop shopping stronger brand names
•Consumers know what •Competitors have strong

they want to by relationships with
computer retailer
•Internet could be a
powerful marketing tool

 Dell decided to offer customized
computers built to order and sold over the
phone, and eventually over the Internet.
 Dell’s strategy capitalized on its strengths
and avoided relying on a deals network.
 Brand and quality threats posed by
Compaq and IBM were lessened

ICTD
 Internet strategy of business
 Primary or overriding strategy of the firm
 Angehern’s model
 Four virtual spaces
 Virtual Information space
 Virtual Communication space
 Virtual Transaction space
 Virtual Distribution space

 Virtual Information space:
 Display information about their org., product, or services
 First step taken towards entering the virtual marketplace.
 Global repository
 Web readable document format
 Navigation
 www
 Major concerns are;

 Information that is displayed is accurate and current
 Easy and faster information accessibility and navigation

 Virtual Communication space:
 Building a site that has a feeling of being a
port of entry into a community
 Space is used to enable relationship building,
negotiation, and exchange of ideas;
 forums,
 chat rooms,
 virtual communities.

 Virtual Transaction space:
 Used to initiate business transactions, such as sales
order, MoU, EFT, Bidding etc.
 Ability to engage in meaningful and sufficient
negotiation process and security of transactions.
 Concerns are:
 Security over data
 Accuracy and integrity of processing methods
 Reliability of vendors
 Reputability of trading partner
 Privacy concerns by customers.

 Virtual Distribution space:
 Space used to deliver the product or services
requested or purchased by the consumer
 Product and services are in digital form
 Ex. On-line news service, software products
 E-commerce major concerns;
 Delivery of product and services only to legitimate,
approved customers
 Reliable delivery or product and services

Market Research Advertising and
Customer Service

Consumers and their behavior
 Finding actual and Potential customers
 Internet Research Institute – emarketer.com
 Shopping habits keep changing as a result
of innovative marketing strategies
 Market segmentation
 Market research – learning about the
customers.

Market Research
 The key for e-tailing is to understand the
consumer decision making process on the
web.
 Consumers behavior model
 Factors that stimulate a consumer to think about buying
 Two types of factors influencing are
 Individual factors
 Environmental factors

Individual Characteristics Environmental characteristics
Age, Gender, ethnicity, Social, family and
education, lifestyle,
communities
psychological Knowledge,
values, Personality
Buyer’s Decisions
Buy or not
What to buy
Stimuli
Where, when
Marketing Others Decision
How much to spend
Making
Price Economical Repeat purchase
Process
Promotion Technology
Product Political
Quality Culture
Vendor Controlled System

Logistic Technical
Customer
Support Support Service
Permanent web design FAQ
Delivery Intelligent E-Mail
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Agents Call Rathnakar
 Asking customers what they want?
 Internet provides easy, fast and relatively inexpensive ways for
vendors to find out what customers want in directly interacting with
them
 Tracking Customers activities on the
web
 Learning about the customers by observing their behavior on the
Internet.
 Site tracking services – using cookies
 Nettracker collects data from client provides periodic reports-
demographic server logs and information's
 Intelligent agents

 E-Com intelligent agents
 Computer programs that conduct routine tasks,
search and retrieve information, support decision
making, and act as domain experts.
 Sense the environment and act autonomously
without human intervention

 A search engine which is usually a software agent
that automatically contact other network resources

on the Internet

 Intelligent agents use expert or knowledge based
capabilities to do search and match.

 Search and Filter agents:
 Intelligent agents can help customers determine
what to buy to specify a specific need.
 This is achieved by looking for specific product
information and critically evaluating it.

 Product and vendor finding agents:
 Comparison agents for the comparison of price.
 Bargainfinder from Accenture – for CD
 Kasbah.com form MIT

 Profiling customers using Intelligent
agents:
 Collects information about customers for
creating profile
 Product brokering
 Collaborative filtering process

Online Advertising
 Internet advertising – media rich, dynamic
and interactive.
 Can be updated at any time with minimal cost
 They can reach a very large no. of potential
buyers all over the world
 Online advertisement is cheaper
 Ads can be interactive and targeted to specific
interested groups or individuals

 Advertising Methods:
 Banners
 Keyword banners
 Random banners
 E-mail advertising
 spamming
 Internetadvertising
 Permission marketing
 Viral marketing

 Electronic catalogs
 Customized catalogs

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Electronic Commerce (EC)

“The buying and selling of products,

2 Alliance Business Academy Rathnakar

4 Alliance Business Academy Rathnakar

 Buying and selling, product and services on the

 Delivery of information, providing customer

5 Alliance Business Academy Rathnakar

6 Alliance Business Academy Rathnakar

 E-commerce is doing business electronically by;

 Uses Computers and telecommunications

7 Alliance Business Academy Rathnakar

 Well suited for EC:

8 Alliance Business Academy Rathnakar

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 Electronic linking of individuals and businesses has new economic

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 The new economy is changing the rules of

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 People, Public Policy, Marketing & Advertisement,

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 Electronic Commerce Applications:

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1. Business to Business Commerce –B2B

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 Manheim online ( Auto dealers auction)

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 EC Uses many activities – manager has to

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